End to food stall profiteering

  • AseanPlus News
  • Sunday, 18 Mar 2012

Investors who paid top dollar to take over hawker stalls in the hope of chasing high yields could be regretting that decision soon.

Property experts said that the value of a stall would crash to nearly zero following recent rule changes that outlaw the transferring of operating licences.

And the stratospheric amounts that some investors forked out in recent months cannot possibly be recouped through rentals alone.

Their comments come in the wake of news that two food stalls at Kovan 209 Market and Food Centre were recently transferred for over S$300,000 (RM729,000) each, according to Chinese evening daily Lianhe Wanbao earlier this week.

Property agent Doris Tan said food stalls at popular Serangoon Gardens hawker centre Chomp Chomp had also been transferred at similarly high amounts in the past.

Hawker stalls are operated with licences obtained from the National Environment Agency.

Currently, licensees are allowed to “assign” or permanently transfer the right to operate the stall to someone else. The practice has led to unofficial “transfer fees” being exchanged, especially in prime areas which are accessible and have high human traffic.

The fees are usually paid by investors who then sublet the stalls.

A quick calculation shows that a monthly rent of S$2,000 (RM4,800) on a S$300,000 investment in “transfer fees” translates to a healthy eight per cent annual yield for the investor.

But these calculations will now change drastically when a new government rule to disallow the transfer of stalls kicks in on April 1.

Any hawker stall that has its licence renewed after that date also cannot be operated by anyone other than the licensee, effectively outlawing the practice of subletting.

The move is expected to stabilise rents and reduce costs for stallholders, which will make food more affordable, said Senior Minister of State (Environment and Water Resources) Grace Fu in Parliament last week.

But Nicholas Mak, head of research and consultancy at SLP International Property Consultancy, warned that investors, who generally do not operate the stalls themselves, may be “stuck” once the changes kick in.

If a stallholder cannot transfer his stall, the “transfer value” of it will fall almost to zero. — The Straits Times/Asia News Network

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